2.1 Preliminary Considerations

• Library: Debt Collection for Virginia Lawyers: A Systematic Approach (Virginia CLE) (2022 Ed.)

2.1 PRELIMINARY CONSIDERATIONS

2.101 Conflicts of Interest.

When a claim is received, whether from a client, another attorney, or a collection agency, it should be reviewed immediately for conflicts of interest by an attorney or a well-trained secretary or legal assistant. An attorney must determine whether his or her firm currently represents the defendant or has represented the defendant in the past. If so, the matter should usually be returned. ²² Maintaining an effective filing system is the key to avoiding these conflicts. A computer program can include a package that will help determine possible conflicts.

Even though multiple representation is allowed if there is complete disclosure and all parties give permission, the attorney must be careful to see that his or her independent judgment is not affected by the multiple representations. Even if no problem exists at the outset, there may be changes in the situation of one of the parties that could cause a conflict later. The attorney should examine potential problems before undertaking the representation. ²³

2.102 Statutes of Limitations.

A. In General.

If the claim is documented, its age should be checked and the applicable statute of limitations determined. ²⁴ Few things are more embarrassing and costly to an attorney than suing on a claim barred by the statute of limitations, or worse, finding that the statute ran while the attorney was investigating it or after the attorney received it and made demand but before suit was recommended and filed.

Chapter 4 of title 8.01 of the Virginia Code is the primary source of the statutes of limitations for most personal actions. ²⁵ In determining the appropriate statute of limitations for a claim, there are two elements to consider: (i) the actual statutory period for the type of action, and (ii) the date from which that period begins to accrue.

B. Statutory Limitations Periods.

In a collection practice, the vast majority of claims are contract matters, either oral or written, or open account claims. A written contract may be enforced for a period of five years against a party who has signed the instrument. ²⁶ On an unwritten contract, express or implied, the period is three years. ²⁷ An open account is generally an implied contract, with a three-year limitation, but if it is based on a credit application or credit card agreement, it may be a written contract subject to the five-year period. However, if it is an account or contract between merchants, the Uniform Commercial Code four-year limit applies in most cases, whether the agreement is oral or written. ²⁸ Under section 8.2-725 the limitation may be reduced in writing to one year, but it cannot be extended.

In 2019, in a case out of Fairfax County, the court ruled that if there were a written contract signed by some but not by all of the parties, all parties were bound by the five-year statute of limitations. The 2019 legislature promptly reversed that ruling, amending 8.01-246 to make it clear that the five-year statute only applied to parties which actually signed the agreement.

At least one circuit court has ruled that when a transaction in goods, such as the consumer sale of an automobile, is financed by an installment sales contract, the four-year UCC statute of limitations applies, and the creditor has four years from the date on which each separate installment is missed to file suit. ²⁹

Other statutes of limitations of which counsel must be aware include:

a. Claims against the Commonwealth: See sections 8.01-195.6 and 8.01-195.7 of the Virginia Code;

b. Claims by the Commonwealth: None; ³⁰

c. Entry on or action for land: Fifteen years from date of first accrual; ³¹

d. Unlawful detainer: Three years from date of entry; ³²

e. Water, sewer, or sidewalk assessments: Ten years from conveyance of land; ³³

f. Money due on deed of trust or mortgage: Ten years from instrument maturity; ³⁴

g. Mortgages without a due date: Twenty years from date of instrument; ³⁵

h. Personal injury: Two years from accrual, but may be extended in certain circumstances. ³⁶ If the injury is caused by the malpractice of a health care provider, see section 8.01-243 of the Virginia Code;

i. Fraud: Two years from accrual; ³⁷

j. Injury to property: Five years from accrual; ³⁸

k. Medical malpractice on minors: See section 8.01-243.1 of the Virginia Code;

l. Actions by prisoners or confined persons: One year from accrual or six months from exhaustion of administrative remedies; ³⁹

m. Wrongful death: Two years from death, but only if the statute had not run on the underlying action.

n. Action against a fiduciary or his or her surety or bond: Ten years from accrual or date of accounting; ⁴⁰

o. Action on a recognizance: Ten years from accrual; ⁴¹

p. Recognizance of bail in a civil suit: Three years from accrual; ⁴²

q. Accountings between partners or between trade merchants, factors, or servants: Five years from cessation of dealings among them; ⁴³

r. Action on a contract governed by the law of another state: Law of foreign state or of Virginia, whichever is shorter; ⁴⁴

s. Libel, slander, or defamation: One year from accrual. ⁴⁵ However, if the defamation is on the Internet, and if it is done anonymously or under a false name, filing the action will toll the statute until the perpetrator is identified or could have been identified through the use of due diligence; ⁴⁶

t. Actions for which no limitation is specified: Two years from accrual; ⁴⁷

u. Actions for recovery of student loans guaranteed by the United States government: None; ⁴⁸

v. Deposit accounts and certificates of deposit: Six years; ⁴⁹

w. Actions on payment bonds under the Virginia Public Procurement Act: One year from the date on which services were last performed or materials were last supplied; ⁵⁰

x. Actions for damages for defective or unsafe conditions arising from improvements to real property: Five years from the date of the construction or improvement of the property; ⁵¹

y. Taxes due the Commonwealth and localities. (1) For taxes due the Commonwealth, the limitation period is seven years from the date that the tax was assessed. ⁵² (2) For taxes due to localities, the limitation period is five years following December 31 of the year for which the taxes were assessed; however, real property taxes may be enforced by sale of the property for twenty years following December 31 of the assessment year. ⁵³ The limitations do not apply to taxes that have been reduced to judgment;

z. Child support due pursuant to a support decree entered by a court: Twenty years from the date on which each support payment was due under the decree; ⁵⁴

aa. Injury from sexual abuse occurring during infancy or during incapacity, twenty years from the date on which the cause of action accrues; ⁵⁵ injury from sexual abuse, other than those actions specified in subsection D of section 8.01-243, within ten years after the cause of action accrues; ⁵⁶

bb. Actions for persons injured by "human trafficking" for sexual purposes, no more than seven years after the later of the date the victim (i) turns 18 or (ii) was no longer subject to the prohibited conduct. ⁵⁷

cc. Legal malpractice: Whether pled as negligence, tort, or simply legal malpractice, the action is one for breach of contract and is governed by the contract statutes of limitations; ⁵⁸

dd. Legal malpractice in estate planning matters: Pursuant to a 2017 enactment, the statute of limitations for legal malpractice in estate planning matters, however pled, is five years if pursuant to a written contract, and three years in the absence of a written contract. ⁵⁹ The statute begins to run when the services are performed, no matter when the alleged malpractice is discovered, and third-party actions can only be pursued if there is a written agreement between the parties in favor of third parties; ⁶⁰ and

ee. Actions for injury to property brought by the Commonwealth against a tortfeasor for expenses arising out of negligent operation of a motor vehicle must be filed within five years of accrual of the action. ⁶¹

C. Accrual of Cause of Action.

It is not always sufficient to know the time limit for filing an action. "Accrual" is often defined separately, and it is important to know each definition. Section 8.01-249, among other sources, provides the following definitions of accrual:

a. Fraud, mistake, or undue influence, including rescission of a contract and actions under the Virginia Consumer Protection Act: From discovery or the date that discovery would have occurred by use of reasonable diligence; ⁶²

b. Action for money on deposit with a bank, person, or entity doing banking business: From the date of the request in writing, by check, order, or otherwise;

c. Malicious prosecution or abuse of process: From the date on which the criminal action is terminated;

d. Injury by exposure to asbestos: From the time that the diagnosis is communicated by a physician to the person or his agent, but not more than two years after the date of death;

e. Contribution or indemnification: When the person seeking the recovery has paid or discharged the obligation;

f. Injury resulting from sexual abuse during the infancy or incapacity of the person;

g. Product liability for implantation of a prosthetic device for breast augmentation or reconstruction: When the fact of the injury and its causal connection to the implantation is first communicated to the person by a physician;

h. Open account: Later of the last payment or last charge;

i. Installment sales contract: From the date on which each payment is missed, and older payments may be time-barred while new payments may be collectable. If the agreement finances a transaction for the sale of goods, at least one circuit court has ruled that the four-year UCC statute ⁶³ applies rather than the five-year statute for a written agreement, ⁶⁴ each missed installment

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